... continued from: Being Up-Front with our Sellers, Part I ...
Tenant-Occupied Properties
An obstacle I run into time and again is a seller who doesn't understand the difficulties of showing, selling and closing a single-family tenant-occupied residential property. The typical situation is that my seller client has a nice little home with a nice little tenant and he wants to sell with the current lease intact. In other words, he doesn't want to kick the tenant out before marketing because he needs the monthly income from the tenant's rental payments. Fair enough.
What he needs to know from me are the various challenges this situation presents. First, tenant-occupied properties rarely show well (or smell fresh). A tenant has no motivation to keep his house clean, especially considering his landlord is trying to sell his home out from under him. Second, tenants are usually not happy about strangers coming into his home on short notice and he may not cooperate with showings. He may insist on unreasonable advance notice or limited showing hours, say between 6pm and 8pm on Mondays, Wednesdays and Thursdays. Third, the ideal buyer for a single-family home is someone who wants to live there, to buy it as a primary residence. Typically, these buyers want to move in as soon as possible and set up housekeeping, not to wait three months or more until the renter's lease runs out. The list goes on.
A phenomenon that I've experienced more than once is the two-faced tenant. The tenant tells his landlord that he'd be happy to cooperate any way he can with the marketing of his home. We all breathe a sigh of relief. Then, when I contact the tenant to introduce myself, he tells me in no uncertain terms that he won't allow showings during the day, he must have at least 24 hour notice (48 on weekends) and that there will be no showings this weekend or next because his family is in town.
Have you run into these situations? Me too, and I'll tell you a secret. Unless I felt that a property was unusually marketable, I stopped taking rental-occupied listings toward the end of my sales career. They simply weren't worth the trouble. But that's just me.
My point is that the seller needs to understand the limitations of your miracle-working abilities. If his situation is seriously limiting the number of buyers who will consider or even be able to look at his listing, he needs to know what this will do to his marketing time and his ultimate sale price. He will not get top dollar for a property that is difficult to show, shows poorly or will not be available for move-in at closing. It takes some finesse to be able to explain these difficulties to a seller without whining, and the best advice I can give you is to be direct, unapologetic and professional. And, if he seems amenable, offer alternatives or solutions. Think about a doctor who has to give you bad news. Sure, he has to tell you you're sick, but hopefully he'll also immediately tell you how he's going to fix you. And what you can do to help him help you.
Some alternatives to offer this seller might be:
1. Reduce the rent or offer a bonus to the renter for his cooperation
2. Explain to the seller the difference in market value between selling his property tenant-occupied and vacant (and cleaned-up). You probably can't give him an exact figure, but you can estimate. I usually said something like "We can probably sell your property for at least $10,000 more if it's cleaned up, vacant and easy to show. If there's any way you could make that happen, you will more than be repaid for your rental loss in your sales price." (Obviously, don't use this strategy you don't feel confident in the marketability of the property, vacant or occupied.)
3. Wait until the tenant's lease expires, clean up the property and sell it then.
4. Underprice the property and hope for a bidding war.
... to be continued ...
copyright Jennifer Allan 2007
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